Preventing employee embezzlement in your organization

Embezzlement is a major issue for U.S. industries, and healthcare is no exception. According to The 2017 HISCOX Embezzlement Study: A report on white collar crime in America, the median annual loss for healthcare organizations due to employee theft was $437,016 in 2016. 

Whether your organization is small, medium or large, there’s a high probability that you have or will experience embezzlement. Unfortunately, it often goes undetected for long periods of time. According to the HISCOX study, nearly 29% of schemes lasted more than five years. Embezzlement schemes can involve anything from funds and merchandise/property theft to check and credit card fraud to false billing. 

Based on a recent MGMA Stat poll, many healthcare leaders recognize the need to take measures to prevent embezzlement in their organization. More than four out of five (81%) of the 1,295 respondents stated yes, they are protecting their practices from embezzlement. Conversely, only 8% said that they were not, while 11% responded that they were unsure. 

Among the most frequent responses from respondents regarding the measures they take are “separating duties among staff” and “conducting internal and external audits.” As one respondent noted, our organization “double and triple counts and sign off on funds … Only physicians have signing rights on the checking account and review bank statements at the end of each month and confirm signatures. All mail-in payments are sent to a lockbox for deposit.”

According to Debra Phairas, MBA, MGMA member, president, Practice & Liabilities Consultants, San Francisco, there are several actions practices can take to reduce the likelihood of embezzlement. Here are a few of the most important: 

• Institute accounting controls: Segregate duties for financial transactions, meticulously review electronic transfers, have one staff member prepare checks and have a practice partner sign them, regularly reconcile EHR, rotate opening mail and posting payments, practice partners should conduct periodic spot checks and an independent accountant should review the practice’s financial records. 
• Verify vendors: Ensure vendors don’t have a conflict of interest with the practice. Also, check that vendors haven’t been fabricated by employees. 
• Show appreciation and treat staff well: Pay employees a competitive salary and offer such benefits as health insurance. Show how much you value them with parties, lunches and dinners, bonuses, and by offering consistent coaching and feedback.
• Conduct reference and background checks on job candidates: Embezzlers often move from practice to practice because many practices don’t prosecute. Take time to check references and carry out background checks. 
• Monitor staff by video: Before adding video surveillance, employers must notify employees in writing why and where they are doing so and have employees sign a consent form. Employers cannot conduct surveillance in private areas such as restrooms and breakrooms. 
• Screen for drugs: Employees who handle money should pass a drug screen. Someone with a drug problem may embezzle money to support their habit.  

Additional resources: 

• For more on implementing a compliance program to help thwart fraud in your practice, read Pamela Ballou-Nelson’s, RN, MSPH, PhD, CMPE, principal, MGMA Consulting, article, Prevent fraud in your medical practice.
• Read the upcoming September issue of MGMA Connection magazine for more insights about detecting fraud and handling risk in your practice.
• For more information to improve and grow your medical practice, contact MGMA Consulting. MGMA’s consultants have decades of collective experience and will provide your practice with actionable solutions.

Christian Green, MA
Writer/editor
MGMA Association Content